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All government spending is ultimately the result of fiscal policy.
Fiscal policy is another way of saying "how government spends money it raises through taxation to influence the economy".
A government that believes it should not play a large part in driving economic demand through spending (a 'tight' fiscal policy) would typically raise and spend less than a government pursuing a 'loose' fiscal policy.
If you count basic state expenditure on social security and healthcare as being non-negotiable then you might typically see a government engaged in discretionary spending such as large infrastructure projects as a result of fiscal policy (i.e. to directly employ the unemployed as workers and boost the economy). These kinds of discretionary spending most often result from fiscal policy.
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What is the reason for fiscal deficit in India?
The fiscal deficit in India is not fundamentally different from the fiscal deficit in any other country. The public always wants more government spending but they do not want more government taxes. The government attempts to oblige, by borrowing money. The result is a deficit.
Does Increase govenment spending may result in higher or lower taxes?
Increased government spending can lead to higher taxes if the government needs to fund its expenditures through revenue generation. Conversely, if the government borrows money or uses surplus funds to finance spending, taxes may remain unchanged or even decrease. The impact on taxes largely depends on the government's fiscal policy decisions and the overall economic context. Ultimately, the relationship between government spending and taxes is complex and influenced by various factors, including economic growth and public demand for services.
Which action is most likely to result in a decrease in money supply?
A contractionary monetary policy or a contractionary fiscal policy.
How can the Federal government affect the fiscal policy?
Generally speaking the fiscal policies of the US Federal government are related to the monetary policies of the US Federal Reserve System. With that said, US fiscal policies of the Federal government can affect the economic situation of the US. The Federal government can do the following to influence the US economy, all of which are meant to improve the economy, however, that may not be the intended result. Here are some but not all examples of how the economy of the US can be affected by the Federal government:* Increase or decrease income taxes on personal and corporate income;* Increase or decrease gasoline taxes;* Increase or decrease tariffs;* Increase or decrease capital gains taxes ( part of income taxation );* Increase or decrease social security payments;* increase or decrease certain Medicare prices (costs )* increase or decrease Federal employment policies;* increase or decrease social spending in terms of food stamps as an example; and* Increase or maintain current levels of the national debt ceiling.
What impact can political pressure's have on fiscal policy?
Political pressures can significantly influence fiscal policy by prioritizing short-term economic gains over long-term stability. Policymakers may implement tax cuts or increased public spending to appease constituents or special interest groups, potentially leading to budget deficits. Additionally, political agendas can shape funding allocations, diverting resources from essential services. Ultimately, such pressures can result in fiscal policies that prioritize political expediency over sound economic principles.
What is The end result of the phase is to produce the president's budget?
The end result of the phase is to produce the president's budget, which serves as a comprehensive financial plan for the federal government. This budget outlines the administration's priorities, funding allocations, and policy objectives for the upcoming fiscal year. It provides a framework for Congress to review and negotiate funding levels for various programs and initiatives. Ultimately, the president's budget reflects the government's strategic goals and fiscal responsibility.
What end result is to produce the President's budget?
The end result of producing the President's budget is to outline the administration's financial priorities and policy goals for the upcoming fiscal year. It serves as a comprehensive plan detailing proposed expenditures, revenue projections, and funding allocations across various government programs and departments. This budget is submitted to Congress, where it is debated and modified before approval, ultimately guiding federal spending and economic policy. Additionally, it reflects the President's vision for addressing national issues and promoting growth.
Why was the creation of new taxes ineffective in bringing the government out of debt?
The creation of new taxes often proved ineffective in reducing government debt because they can stifle economic growth, leading to reduced tax revenues. Additionally, increased taxation may result in public resistance or tax evasion, further limiting the expected revenue. Moreover, if government spending continues to outpace income, even higher taxes won't solve the underlying fiscal imbalance. Ultimately, without comprehensive reforms in spending and economic policy, new taxes alone cannot effectively address debt issues.
What is the difference between fiscal policy and monetary policy?
The government uses both fiscal and monetary policy to stimulate the economy (get it growing) and also to slow the rate of growth down when it gets overheated. With fiscal policy the government influences the economy by changing how the government collects and spends money. The most common tools that the government enacts to effect fiscal policy include:• Increased Spending on new government programs and initiatives (such as job creation programs). This has the effect of increasing demand for labor and can result in lower unemployment levels• Automatic Fiscal Programs are programs that take effect immediately to help correct the slide in the economy. Probably the single best example of this is unemployment insurance which a person can file for as soon as they lose their job.• Tax Cuts are another tool that government uses to stimulate demand for goods and services when the economy takes a turn for the worse. The effect of a tax break is to put more money back in the pockets of businesses and consumers which they can spend and put back to work in the economy.Monetary Policy, on the other hand, involves the manipulation of the available money supply within the economy. In the United States, the role of manipulating the money supply falls to the Fed or the central bank in the US. Not only does the Fed have overall responsibility for the country's monetary policy, but it also has responsibility for issuing currency and overseeing bank operations. An increasing money supply puts more money in the hands of consumers which they turn around and spend - a decreasing money supply does just the opposite.In order to increase or decrease the money supply, the Fed has four principal levers which it pulls to try and effect change. The first thing that the Fed can do is to alter the reserve ratio which is the percentage of assets that commercial banks have to keep on deposit at one of the Federal Reserve Banks - the higher the reserve ratio, the less money that banks can lend out to the general public.Another way the Fed can control the money supply is by adjusting the federal funds rate (fed funds rate). The federal funds rate is a short-term borrowing rate that banks have established amongst themselves for short-term borrowing. Another way the Fed can adjust the money supply is by raising or lowering the discount rate which is the rate at which commercial banks can borrow money from the Fed. The higher the rate (or interest charged on the loan), the less inclined commercial banks are to borrow and a smaller amount of money will be available in the market. And lastly, the Fed can buy and sell government bonds. The buying of bonds translates into income for the US government, which can in turn put more money into the economy.i
What is a Tight money policy?
A tight money policy is a monetary policy approach used by central banks to reduce the money supply in the economy, typically by raising interest rates and selling government securities. This policy aims to combat inflation by making borrowing more expensive and encouraging saving over spending. As a result, consumer and business spending may decrease, which can help stabilize prices but may also slow economic growth. Tight money policies are often employed during periods of high inflation.
What is keynesian doctrine and it's effect to microeconomics?
Keynesian doctrine, developed by economist John Maynard Keynes, emphasizes the role of government intervention in stabilizing economic fluctuations and promoting full employment through fiscal policy, such as government spending and taxation. In microeconomics, this doctrine influences individual firms and consumers by suggesting that aggregate demand drives economic activity, leading to increased consumption and investment during downturns. As a result, Keynesian policies can shape market behaviors, affecting supply and demand dynamics and influencing pricing strategies. This approach can also lead to greater emphasis on consumer confidence and spending in microeconomic analysis.
Measures to control of business cycles?
Business cycles can be controlled by appropriate fiscal policy and monetary policy. When the economy enters the recessionary phase, government spending should be increased (fiscal policy measure). This includes infrastructure projects, subsidies to productive sectors, etc. When infrastructure projects are undertaken, there is requirement of labor (when roads are built, construction labor is required), which leads to employment. Also supplies of cement, iron, steel, etc is required. The production of these commodities increase. People start earning wages. They earn, and so they consume more. As a result of which economy enters into expansion phase. Thanks to subsidies, cost of production goes down. The producers can offer products at lower cost. When the economy enters expansionary phase which is above the normal growth path, monetary measures by Central banks are effective. The central bank tries to reduce the money in circulation with its open market operations and by increasing Reserve requirements. Basically contractionary monetary or fiscal measures are used to deal with high growth and inflation, while expansionary monetary or fiscal policy for recession.
